IPO market faces headwinds as FY26 returns hit multi-year low of -7%; dim outlook for listing-bound firms

India’s primary market has taken a hit from sustained volatility in equities, with most mainboard initial public offerings (IPOs) listed in FY26 struggling to retain post-listing gains amid escalating geopolitical tensions and a fragile investment climate.

The pressure stems largely from the sharp correction in the broader market, with benchmark indices -the Sensex and Nifty 50 - declining nearly 15% so far this year, including a drop of over 10% in March. This has significantly dampened investor appetite for higher-risk offerings and weighed on IPO performance.

In FY26, average returns from 108 listed mainboard IPOs slipped to -7%, marking a sharp reversal from the consistent gains seen over the past five years and signalling a clear shift in market sentiment. This marks a significant inflection point, driven by a combination of global uncertainties, foreign investor outflows, and valuation concerns catching up with the primary market.

Average listing-day gains drop to 8% from 30% in FY25

Listing-day performance has also weakened, with average gains dropping to just 8% from 30% in the previous year, according to data shared by Delhi-based PRIME Database Group. Only 34 IPOs, or about 31%, managed to deliver returns of over 10%, compared to 71% in FY25, while just 37 are currently trading above their issue price, the data showed.

The downturn comes after a prolonged period of strong returns, during which IPO investors saw gains of 202% in FY21, 78% in FY22, 49% in FY23, 16% in FY24, and 3% in FY25.

Despite the weak aftermarket performance, fundraising activity has remained resilient. According to PRIME Database Group, 112 companies raised a record ₹1.79 lakh crore through mainboard IPOs in FY26, marking the first time India has witnessed two consecutive years of all-time high IPO fundraising. However, the momentum slowed toward the end of the year, reflecting growing caution among both issuers and investors.

“Despite the tepid end to the year, with just ₹18,772 crore being raised in the last three months, this is the first time in India’s history that there have been two consecutive years of all-time high IPO fundraising activity. In the past, a strong IPO year was almost always followed by a lull lasting two to three years,” said Pranav Haldea, Managing Director, PRIME Database Group.

According to Haldea, IPO response was further impacted by weaker listing performance amid geopolitical concerns. “Lower investor enthusiasm can be gauged from the fact that, across categories, the average oversubscription stood at 28 times, compared to 49 times last year. Average retail oversubscription also stood at 18 times, compared to 35 times last year,” he added.

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